Inflation rate drops to 1.6% in September

Canada’s inflation rate fell to 1.6 per cent in September, Statistics Canada reported Tuesday, after hitting the Bank of Canada’s 2 per cent goal in August.

The data agency said the numbers marked the smallest year-over-year increase to the consumer price index since February 2021.

Lower gasoline prices, which fell by 10.7 per cent on a yearly basis, drove inflation down last month. With gasoline excluded, the all-items inflation rate came in at 2.2 per cent, the same as August.

The agency noted that prices remain elevated — especially for rent and groceries — even as inflation has cooled off.

For the second consecutive month, food prices grew at a faster rate than headline inflation. Prices declined on a yearly basis for seafood and other marine products, nuts and seeds, and fish, but increased for fresh and frozen beef and eggs.

Rent prices increased at a slower pace in September, rising 8.2 per cent year-over-year compared to 8.9 per cent in August, with slower growth in Newfoundland and Labrador, New Brunswick and B.C.

Some analysts think that the reading makes a 50 basis point rate cut more likely at the Bank of Canada’s Oct. 23 meeting. The bank has so far cut the rate three times this year.

“Canadian headline inflation decelerated by more than expected last month, lowering the hurdle to an outsized rate cut at next week’s Bank of Canada meeting,” said Karl Schamotta, chief market strategist at Corpay.

“We’re still not convinced the Canadian economy needs an emergency-scale response, but there is little question today’s data will lower the downside risks associated with moving more aggressively,” Schamotta said.